Accounting Policies of MRF Ltd. Company

Sep 30, 2014

A. BASIS OF ACCOUNTING:

The financial statements are prepared under the historical cost
convention on an accrual basis, in accordance with relevant
requirements of the Companies Act, 1956 and applicable Accounting
Standards notified by the Companies (Accounting Standards) Rules, 2006.

All assets and liabilities have been classified as current or
non-current as per the Company''s normal operating cycle and other
criteria set out in the Schedule VI to the Companies Act, 1956.

B. USE OF ESTIMATES:

The preparation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of financial statements and the reported
amounts of revenues and expenses during the reported period.
Difference between the actual results and estimates are recognised in
the period in which the results are known or materialise.

C. FIXED ASSETS AND DEPRECIATION:

a) Fixed Assets are stated at cost net of credits under Cenvat/VAT
Schemes. All costs relating to the acquisition including freight and
installation of Fixed Assets are capitalised and also include borrowing
cost upto the date of capitalisation.

b) Depreciation:

(i) Depreciation on buildings, plant and machinery, moulds and a part
of other assets has been provided on straight line method at the rates
and on the basis as specified in Schedule XIV to the Companies Act,
1956, and in respect of vehicles and a part of other assets where,
based on management''s estimate of the useful life of the assets, higher
depreciation has been provided on straight line method at the rate of
20%.

(ii) Assets acquired/purchased costing less than Rupees five thousand
have been depreciated at the rate of 100%.

(iii) Depreciation on Renewable Energy Saving Devices, viz., Windmills,
is being charged on Reducing Balancing Method, as Continuous Process
Plant at the rates and on the basis as specified in Schedule XIV to the
Companies Act, 1956.

(iv) Leasehold Land is amortised over the period of the lease.

(v) Intangible Assets are amortised over 5 years commencing from the
year in which the expenditure is incurred.

D. IMPAIRMENT OF ASSETS:

The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognised in the Statement of Profit and Loss. If at the Balance Sheet
date there is an indication that if a previously assessed impairment
loss no longer exists, the recoverable amount is reassessed and the
asset is reflected at the recoverable amount.

E. INVESTMENTS:

Investments that are readily realisable and are intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long term investments. Current investments are carried at
lower of cost and fair value. Long-term investments are carried at
cost. However, provision for diminution is made to recognise a decline,
other than temporary, in the value of the investments, such reduction
being determined and made for each investment individually.

The cost is computed on FIFO basis except for stores and spares which
are on Weighted Average Cost basis and is net of credits under
Cenvat/VAT Schemes.

Stock in process and finished goods inventories include materials,
labour cost and other related overheads.

G. REVENUE RECOGNITION:

Sale of goods and services are recognised when risks and rewards of
ownership are passed on to the customer which generally coincides with
delivery and when the services are rendered. Sales include excise duty
but exclude VAT and warranty claims.

H. EXCISE DUTY:

Excise duty has been accounted on the basis of both payments made in
respect of goods despatched and also provision made for goods lying in
bonded warehouses.

I. RESEARCH AND DEVELOPMENT:

Revenue expenditure on research and development is charged to the
Statement of Profit and Loss of the year in which it is incurred.
Capital expenditure on research and development is included as
additions to fixed assets.

J. TAXATION:

Provision for current tax is made on the basis of estimated taxable
income for the current accounting period and in accordance with the
provisions of the Income Tax Act, 1961.

Deferred Tax for timing differences between the book and tax profits
for the year is accounted for, using the tax rates and laws that have
been enacted or substantially enacted on the Balance Sheet date.
Deferred tax assets are recognised only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised. If
the company has carry forward unabsorbed depreciation and tax losses,
deferred Tax assets are recognised only to the extent there is a
virtual certainty supported by convincing evidence that sufficient
taxable income will be available against which such deferred tax assets
can be realised.

K. LEASES:

Lease payments under operating leases are recognised as expenses on
straight line basis over the lease term in accordance with the period
specified in respective agreements.

L. EMPLOYEE BENEFITS:

The Company contributes to Regional Provident Fund Commissioner on
behalf of its employees and such contributions are charged to the
Statement of Profit and Loss. In respect of some of its employees, the
Company contributes the Provident fund to a trust established for this
purpose based on fixed percentage of the eligible employees'' salary and
is charged to the Statement of Profit and Loss. The Company is liable
for annual contributions and any shortfall in the fund assets and
interest based on the Government specified minimum rate of return and
recognises such contributions and shortfall, if any, as an expense in
the year incurred.

The Company also contributes to a government administered Pension fund
on behalf of its employees, which are charged to the Statement of
Profit and Loss.

Superannuation benefits to employees, as per Company''s Scheme, have
been funded with Life Insurance Corporation of India (LIC) and the
contribution is charged to the Statement of Profit and Loss.

Liabilities with regard to Gratuity are determined under Group Gratuity
Scheme with LIC and the provision required is determined as per
Actuarial Valuation as at the Balance Sheet date, using the Projected
Unit Credit Method.

Short-term employee benefits are recognised as an expense as per the
Company''s Scheme based on expected obligation on undiscounted basis.
Other long term employee benefits are provided based on the Actuarial
Valuation done at the year end, using the Projected Unit Credit Method.

Actuarial gain/loss are charged to the Statement of Profit and Loss and
not deferred.

M. FOREIGN CURRENCY TRANSACTIONS:

Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing at the date of the transaction or that
approximates the actual rate as at the date of transaction.

Monetary items denominated in foreign currencies at the year end are
restated at year end rates. In case of monetary items which are covered
by forward exchange contracts, the difference between the year end rate
and the contracted rate is recognised as exchange difference. Premium
paid on forward contracts is recognised over the life of the contract.
Non monetary items are carried in terms of historical cost denominated
in foreign currency and is recorded using the exchange rate prevailing
at the date of the transaction or that approximates the actual rate as
at the date of transaction.

In respect of branches, which are integral foreign operations, all
transactions are translated at rates prevailing at the date of
transaction or that approximates the actual rate as at the date of
transaction. Branch monetary assets and liabilities are restated at the
year-end rates. Any income or expense on account of exchange rate
difference either on settlement or on translation is recognised in the
Statement of Profit and Loss.

N. DERIVATIVE TRANSACTIONS:

The Company uses derivative financial instruments, such as Forward
Exchange Contracts, Currency Swaps and Interest Rate Swaps, to hedge
its risks associated with foreign currency fluctuations and interest
rates. Currency and interest rate swaps are accounted in accordance
with their contract. At every period end, all outstanding derivative
contracts are fair valued on a marked-to-market basis and any loss on
valuation is recognised in the Statement of Profit and Loss, on each
contract basis. Any gain on marked-to-market valuation on respective
contracts is not recognised by the Company, keeping in view the
principle of prudence as enunciated in AS-1 "Disclosure on Accounting
Policies".

O. BORROWING COSTS:

Borrowing costs that are attributable to the acquisition of or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.

P. WARRANTY:

Provision for product warranties is recognised based on management
estimate regarding possible future outflows on servicing the customers
during the warranty period. These estimates are computed on scientific
basis as per past trends of such claims.

Q. PROVISIONS AND CONTINGENT LIABILITIES:

A provision is recognised when there is a present obligation as a
result of a past event where it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Contingent liability is
disclosed for (i) Possible obligations which will be confirmed only by
future events not wholly within the control of the Company or (ii)
Present obligations arising from past events where it is not probable
that an outflow of resources will be required to settle the obligation
or a reliable estimate of the amount of the obligation cannot be made.
Contingent Assets are not recognised in the financial statements since
this may result in the recognition of income that may never be
realized.

Sep 30, 2013

A. BASIS OF ACCOUNTING:

The financial statements are prepared under the historical cost
convention on an accrual basis, in accordance with relevant requirements
of the Companies Act, 1956 and applicable Accounting Standards
notified by the Companies (Accounting Standards) Rules, 2006.

All assets and liabilities have been classified as current or non-
current as per the Company''s normal operating cycle and other criteria
set out in the Schedule VI to the Companies Act, 1956.

B. USE OF ESTIMATES:

The preparation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of financial statements and the reported
amounts of revenues and expenses during the reported period.
Difference between the actual results and estimates are recognised in
the period in which the results are known or materialise.

C. FIXED ASSETS AND DEPRECIATION:

a. Fixed Assets are stated at cost net of credits under Cenvat/VAT
Schemes. All costs relating to the acquisition including freight and
installation of fixed assets are capitalised and also include interest
on borrowings up to the date of capitalisation.

b. Depreciation:

(i) Depreciation on buildings, plant and machinery, moulds and a part
of other assets has been provided on straight line method at the rates
and on the basis as specified in Schedule XIV to the Companies Act,
1956, and in respect of vehicles and a part of other assets where,
based on management''s estimate of the useful life of the assets, higher
depreciation has been provided on straight line method at the rate of
20%.

(ii) Assets acquired/purchased costing less than Rupees Five Thousand
have been depreciated at the rate of 100%.

(iii) Depreciation on Renewable Energy Saving Devices, viz., Windmills,
is being charged on Reducing Balancing Method, as Continuous Process
Plant at the rates and on the basis as specified in Schedule XIV to the
Companies Act, 1956.

(iv) Leasehold Land is amortised over the period of the lease.

(v) Intangible Assets are amortised over 5 years commencing from the
year in which the expenditure is incurred.

D. IMPAIRMENT OF ASSETS:

The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognised in the Statement of Profit and Loss. If at the Balance Sheet
date there is an indication that if a previously assessed impairment
loss no longer exists, the recoverable amount is reassessed and the
asset is reflected at the recoverable amount.

E. INVESTMENTS:

Investments that are readily realisable and are intended to be held for
not more than one year from the date on which such investments are
made, are classified as current investments. All other investments are
classified as long-term investments. Current investments are carried at
lower of cost and fair value. Long-term investments are carried at
cost. However, provision for diminution is made to recognise a decline,
other than temporary, in the value of the investments, such reduction
being determined and made for each investment individually.

The cost is computed on FIFO basis except for stores and spares which
are on Weighted Average Cost basis and is net of credits under
Cenvat/VAT Schemes.

Stock-in-process and finished goods inventories include materials,
labour cost and other related overheads.

G. REVENUE RECOGNITION: 1

Sale of goods and services are recognised when risks and rewards of
ownership are passed on to the customers which generally coincides with
delivery and when the services are rendered. Sales include excise duty
but exclude VAT and warranty claims.

H. EXCISE DUTY:

Excise Duty has been accounted on the basis of both payments made in
respect of goods dispatched and also provision made for goods lying in
bonded warehouses.

I. RESEARCH AND DEVELOPMENT:

Revenue expenditure on research and development is charged to the
Statement of Profit and Loss of the year in which it is incurred.

Capital expenditure on research and development is included as
additions to fixed assets.

J. TAXATION:

Provision for current tax is made on the basis of estimated taxable
income for the current accounting period and in accordance with the
provisions of the Income Tax Act, 1961.

Deferred tax for timing differences between the book and tax profits
for the year is accounted for, using the tax rates and laws that have
been enacted or substantially enacted on the Balance Sheet date.

Deferred tax assets are recognised only to the extent that there is
reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised.

If the company has carry forward unabsorbed depreciation and tax
losses, deferred tax assets are recognised only to the extent there is
a virtual certainty supported by convincing evidence that sufficient
taxable income will be available against which such deferred tax assets
can be realised.

C. LEASES:

Lease payments under operating leases are recognised as expenses on
straight line basis over the lease term in accordance with the period
specified in respective agreements.

EMPLOYEE BENEFITS:

The Company contributes to regional provident fund commissioner on
behalf of its employees and such contributions are charged to the
Statement of Profit and Loss. In respect of some of its employees the
Company contributes the provident fund to a trust established for this
purpose based on fixed percentage of the eligible employees'' salary and
is charged to the Statement of Profit and Loss. The Company is liable
for annual contributions and any shortfall in the fund assets and
interest based on the Government specified minimum rate of return and
recognises such contributions and shortfall, if any, as an expense in
the year incurred.

The Company also contributes to a government administered Pension Fund
on behalf of its employees, which are charged to the Statement of
Profit and Loss.

Superannuation benefits to employees, as per Company''s scheme, have
been funded with Life Insurance Corporation of India (LIC) and the
contribution is charged to the Statement of Profit and Loss.

Liabilities with regard to gratuity are determined under group gratuity
scheme with LIC and the provision required is determined as per
actuarial valuation as at the Balance Sheet date, using the projected
unit credit method.

Short term employee benefits are recognised as an expense as per the
Company''s scheme based on expected obligation on undiscounted basis.
Other long-term employee benefits are provided based on the actuarial
valuation done at the year end, using the projected unit credit method.

Actuarial gain/loss are charged to the Statement of Profit and Loss and
not deferred.

M. FOREIGN CURRENCY TRANSACTIONS:

Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing at the date of the transaction or that
approximates the actual rate as at the date of transaction.

Monetary items denominated in foreign currencies at the yearend are
restated at year end rates. In case of monetary items which are covered
by forward exchange contracts, the difference between the yearend rate
and the contracted rate is recognised as exchange difference. Premium
paid on forward contracts is recognised over the life of the contract.
Non-monetary items are carried in terms of historical cost denominated
in foreign currency and is recorded using the exchange rate prevailing
at the date of the transaction or that approximates the actual rate as
at the date of transaction.

In respect of branches, which are integral foreign operations, all
transactions are translated at rates prevailing at the date of
transaction or that approximates the actual rate as at the date of
transaction. Branch monetary assets and liabilities are restated at the
year-end rates. Any income or expense on account of exchange rate
difference either on settlement or on translation is recognised in the
Statement of Profit and Loss.

N. DERIVATIVE TRANSACTIONS:

The Company uses derivative financial instruments, such as Forward
Exchange Contracts, Currency Swaps and Interest Rate Swaps, to hedge
its risks associated with foreign currency fluctuations and interest
rates. Currency and interest rate swaps are accounted in accordance
with their contract. At every period end, all outstanding derivative
contracts are fair valued on a marked-to-market basis and any loss on
valuation is recognised in the Statement of Profit and Loss, on each
contract basis. Any gain on marked-to-market valuation on respective
contracts is not recognised by the Company, keeping in view the
principle of prudence as enunciated in AS-1 "Disclosure on Accounting
Policies".

O. BORROWING COSTS:

Borrowing costs that are attributable to the acquisition of or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for tended use. Al I other
borrowing costs are charged to revenue.

P. WARRANTY:

Provision for product warranties is recognised based on management
estimate regarding possible future outflows on servicing the customers
during the warranty period. These estimates are computed on scientific
basis as per past trends of such claims.

Q. PROVISIONS AND CONTINGENT LIABILITIES:

A provision is recognised when there is a present obligation as a
result of a past event where it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Contingent liability is
disclosed for (i) Possible obligations which will be confirmed only by
future events not wholly within the control of the Company or (ii)
Present obligations arising from past events where it is not probable
that an outflow of resources will be required to settle the obligation
or a reliable estimate of the amount of the obligation cannot be made.
Contingent Assets are not recognised in the financial statements si nee
this may result in the recognition of income that may never be
realized.

Sep 30, 2010

A. BASIS OF ACCOU NTING:

The financial statements are prepared under the historical cost
convention on an accrual basis, in accordance with relevant
requirements of the Companies Act, 1956 and applicable Accounting
Standards notified by the Companies (Accounting Standards) Rules, 2006.

B. USE OF ESTIMATES:

The preparation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of financial statements and the reported
amounts of revenues and expenses during the reported period. Difference
between the actual results and estimates are recognised in the period
in which the results are known or materialise.

C. FIXED ASSETS AND DEPRECIATION:

a. Fixed Assets are stated at cost net of credits under Cenvat/VAT
Schemes. All costs relating to the acquisition including freight and
installation of Fixed Assets are capitalised and also include interest
on borrowings upto the date of capitalisation.

b. Depreciation:

(i) Depreciation in respect of buildings, plant and machinery, moulds
and a part of the other assets acquired/purchased upto September, 1986
has been provided on straight line method and additions from 1 st
October, 1986 to 30th September, 1987 on reducing balance method at the
rates corresponding to the rates applicable under the Income Tax Rules
in force at the time of acquisition/purchase of assets pursuant to
Circular 1/86 dated 21st May, 1986 issued by the Department of Company
Affairs in accordance with the provisions of Section 205 of the
Companies Act, 1956.

(ii) Depreciation on buildings, plant and machinery, moulds and a part
of other assets acquired/purchased on or after 1st October, 1987 is
being provided on reducing balance method at the revised rates and on
the basis as specified in Schedule XIV to the Companies Act, 1956.
From 1 st October, 1993, assets acquired/purchased costing less than
Rupees five thousand have been depreciated at the rate of 100%.

(iii) Depreciation on Renewable Energy Saving Devices, viz., Windmills,
is being charged on Reducing Balancing Method, as Continuous Process
Plant at the rates and on the basis as specified in Schedule XIV to the
Companies Act, 1956.

(iv) Depreciation is being charged on straight line method at the rate
of 20% in respect of vehicles and a part of other assets.

(v) Leasehold land is amortised over the period of the lease.

(vi) Intangible assets are amortised over 5 years commencing from the
year in which the expenditure is incurred.

D. IMPAIRMENT OF ASSETS:

The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognised in the Profit and Loss Account. If at the Balance Sheet date
there is an indication that if a previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount.

E. INVESTMENTS:

Long term Investments are stated at Cost. Current investments are
stated lower of cost and fair value. Diminution is provided to
recognise a decline, other than temporary, in the value of long term
investments.

The cost is computed on FIFO basis except for stores and spares which
are on Weighted Average Cost basis and is net of credits under Cenvat/
VAT Schemes.

Work-in-Progress and Finished Goods inventories include materials,
labour cost and other related overheads.

G. REVENUE RECOGNITION:

Sale of goods and services are recognised when risks and rewards of
ownership are passed on to the customers which generally coincides with
delivery and when the services are rendered. Sales include Excise Duty
but exclude VAT and warranty claims.

H. EXCISE DUTY:

Excise Duty has been accounted on the basis of both payments made in
respect of goods despatched and also provision made for goods lying in
bonded warehouses.

I. RESEARCH AND DEVELOPMENT:

Revenue expenditure on Research and Development is charged to the
Profit and Loss Account of the year in which it is incurred. Capital
expenditure on Research and Development is included as additions to
fixed assets.

J. TAXATION

Provision for Current Tax is made on the basis of estimated taxable
income for the current accounting period and in accordance with the
provisions of the Income Tax Act, 1961.

Deferred Tax for timing differences between the book and tax profits
for the year is accounted for, using the tax rates and laws that have
been enacted or substantially enacted on the Balance Sheet date. The
Deferred Tax Asset is recognised and carried forward only to the extent
that there is a reasonable certainty except for carry forward losses
and unabsorbed depreciation which is recognised on virtual certainty
that the assets will be adjusted in future.

K. LEASES:

Lease payments under operating leases are recognised as expenses on
straight line basis over the lease term in accordance with the period
specified in respective agreements.

L. EMPLOYEE BENEFITS:

The Companys contribution to the Provident Fund is remitted to a Trust
established for this purpose based on fixed percentage of the eligible
employees salary and charged to the Profit and Loss Account. The
Company is liable for annual contributions and any shortfall in the
fund assets, based on the Government specified minimum rate of return
and recognises such contributions and shortfall, if any, as an expense
in the year incurred. The Company also contributes to Regional
Provident Fund on behalf of some of its employees who are not part of
the above Trust and such contributions are charged to the Profit and
Loss Account.

The Company also contributes to a government administered Pension Fund
on behalf of its employees, which are charged to the Profit and Loss
Account.

Superannuation benefits to employees, as per Companys Scheme, have
been funded with Life Insurance Corporation of India (LIC) and the
contribution is charged to the Profit and Loss Account.

Liabilities with regard to Gratuity are determined under Group Gratuity
Scheme with LIC and the provision required is determined as per
Actuarial Valuation as at the Balance Sheet date, using the Projected
Unit Credit Method.

Short term employee benefits are recognised as an expense as per the
Companys Scheme based on expected obligation on undiscounted basis.
Other long term employee benefits are provided based on the Actuarial
Valuation done at the year end, using the Projected Unit Credit Method.

Actuarial gains/loss are charged to the Profit and Loss Account and not
deferred.

M. FOREIGN CURRENCY TRANSACTIONS:

Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing at the time of the transaction.

Monetary items denominated in foreign currencies at the year end are
restated at year end rates. In case of monetary items which are covered
by forward exchange contracts, the difference between the year end rate
and the contracted rate is recognised as exchange difference. Premium
paid on forward contracts has been recognised over the life of the
contract. Non monetary foreign currency items are carried at cost.

In respect of branches, which are integral foreign operations, all
transactions are translated at rates prevailing at the time of
transaction or that approximates the actual rate as at the date of
transaction. Branch monetary assets and liabilities are restated at the
year end rates. Any income or expense on account of exchange rate
difference either on settlement or on translation is recognised in the
Profit and Loss account.

N. DERIVATIVE TRANSACTIONS:

The Company uses derivative financial instruments, such as Forward
Exchange Contracts, Currency Swaps and Interest Rate Swaps, to hedge
its risks associated with foreign currency fluctuations and interest
rates. Currency and interest rate swaps are accounted in accordance
with their contract. At every period end all outstanding derivative
contracts are fair valued on a marked-to-market basis and any loss on
valuation is recognised in the Profit and Loss Account, on each
contract basis. Any gain on marked-to-market valuation on respective
contracts is not recognised by the Company, keeping in view the
principle of prudence as enunciated in AS-1 "Disclosure on Accounting
Policies".

0. BORROWING COSTS:

Borrowing costs that are attributable to the acquisition of or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue. P. WARRANTY:

Provision for product warranties is recognised based on management
estimate regarding possible future outflows on servicing the customers
during the warranty period. These estimates are computed on scientific
basis as per past trends of such claims.

Q. PROVISIONS AND CONTINGENT LIABILITIES:

A provision is recognised when there is a present obligation as a
result of a past event where it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Contingent liability is
disclosed for (i) Possible obligations which will be confirmed only by
future events not wholly within the control of the Company or (ii)
Present obligations arising from past events where it is not probable
that an outflow of resources will be required to settle the obligation
or a reliable estimate of the amount of the obligation cannot be made.
Contingent Assets are not recognised in the financial statements since
this may result in the recognition of income that may never be
realized.

Sep 30, 2009

A. BASIS OF ACCOUNTING:

The financial statements are prepared under the historical cost
convention on an accrual basis, in accordance with relevant
requirements of the Companies Act, 1956 and applicable Accounting
Standards notified by the Companies (Accounting Standards) Rules, 2006.

B. USE OF ESTIMATES:

The preparation of financial statements in conformity with the
generally accepted accounting principles requires estimates and
assumptions to be made that affect the reported amounts of assets and
liabilities on the date of financial statements and the reported
amounts of revenues and expenses during the reported period. Difference
between the actual results and estimates are recognised in the period
in which the results are known or materialise.

C. FIXED ASSETS AND DEPRECIATION:

a. Fixed Assets are stated at cost net of credits under Cenvat/VAT
Schemes. All costs relating to the acquisition including freight and
installation of Fixed Assets are capitalised and also include interest
on borrowings upto the date of capitalisation.

b. Depreciation:

(i) Depreciation in respect of buildings, plant and machinery, moulds
and a part of the other assets acquired/purchased upto September, 1986
has been provided on straight line method and additions from 1st
October, 1986 to 30th September, 1987 on reducing balance method at the
rates corresponding to the rates applicable under the Income Tax Rules
in force at the time of acquisition/purchase of assets pursuant to
Circular 1/86 dated 21 st May, 1986 issued by the Department of Company
Affairs in accordance with the provisions of Section 205 of the
Companies Act, 1956.

(ii) Depreciation on buildings, plant and machinery, moulds and a part
of other assets acquired/purchased on or after 1 st October, 1987 is
being provided on reducing balance method at the revised rates and on
the basis as specified in Schedule XIV to the Companies Act, 1956. From
1 st October, 1993, assets acquired/purchased costing less than Rupees
five thousand have been depreciated at the rate of 100%.

(iii) Depreciation on Renewable Energy Saving Devices, viz., Windmills,
is being charged on Reducing Balance Method, as Continuous Process
Plant at the rates and on the basis as specified in Schedule XIV to the
Companies Act, 1956.

(iv) Depreciation is being charged on straight line method at the rate
of 20% in respect of vehicles and a part of other assets.

(v) Leasehold land is amortised over the period of the lease.

(vi) Intangible assets are amortised over 5 years commencing from the
year in which the expenditure is incurred.

D. IMPAIRMENT OF ASSETS:

The Company assesses at each Balance Sheet date whether there is any
indication that an asset may be impaired. If any such indication
exists, the Company estimates the recoverable amount of the asset. If
such recoverable amount of the asset or the recoverable amount of the
cash generating unit to which the asset belongs is less than its
carrying amount, the carrying amount is reduced to its recoverable
amount. The reduction is treated as an impairment loss and is
recognised in the Profit and Loss Account. If at the Balance Sheet date
there is an indication that if a previously assessed impairment loss no
longer exists, the recoverable amount is reassessed and the asset is
reflected at the recoverable amount.

E. INVESTMENTS:

Long term Investments are stated at cost. Current investments are
stated lower of cost and fair value. Diminution is provided to
recognise a decline, other than temporary, in the value of long term
investments.

The cost is computed on FIFO basis except for stores and spares which
are on Weighted Average Cost basis and is net of credits under CenvaWAT
Schemes.

Work-in-Progress and Finished Goods inventories include materials,
labour cost and other related overheads.

C. REVENUE RECOGNITION:

Sale of goods and services are recognised when risks and rewards of
ownership are passed on to the customers which generally coincides with
delivery - and when the services are rendered. Sales include excise
duty but exclude VAT.

H. EXCISE DUTY:

Excise duty has been accounted on the basis of both payments made in
respect of goods despatched and also provision made for goods lying in
bonded warehouses.

I. RESEARCH AND DEVELOPMENT:

Revenue expenditure on Research and Development is charged to the
Profit and Loss Account of the year in which it is incurred. Capital
expenditure on Research and Development is included as additions to
fixed assets.

J. TAXATION:

Provision for current tax is made on the basis of estimated taxable
income for the current accounting period and in accordance with the
provisions of the Income Tax Act, 1961.

Deferred tax for timing differences between the book and tax profits
for the year is accounted for, using the tax rates and laws that have
been enacted or substantially enacted on the Balance Sheet date. The
deferred tax asset is recognised and carried forward only to the extent
that there is a reasonable certainty except for carry forward losses
and unabsorbed depreciation which is recognised on virtual certainty
that the assets will be adjusted in future.

K. LEASES:

Lease payments under operating leases are recognised as expenses on
straight line basis over the lease term in accordance with the period
specified in respective agreements.

L. EMPLOYEE BENEFITS:

The Companys contribution to the Provident Fund is remitted to a Trust
established for this purpose based on fixed percentage of the eligible
employees salary and charged to the Profit and Loss Account. The
Company is liable for annual contributions and any shortfall in the
fund assets, based on the government specified minimum rate of return
and recognises such contributions and shortfall, if any, as an expense
in the year incurred. The Company also contributes to Regional
Provident Fund on behalf of some of its employees who are not part of
the above Trust and such contributions are charged to the Profit and
Loss Account. The Company also contributes to a government
administered Pension Fund on behalf of its employees, which are charged
to the Profit and Loss Account.

Superannuation benefits to employees, as per Companys Scheme, have
been funded with Life Insurance Corporation of India (LIC) and the
contribution is charged to the Profit and Loss Account.

Liabilities with regard to Gratuity are determined under Group Gratuity
Scheme with LIC and the provision required is determined as per
Actuarial Valuation as at the Balance Sheet date, using the Projected
Unit Credit Method.

Short term employee benefits are recognised as an expense as per the
Companys Scheme based on expected obligation on undiscounted basis.
Other long term employee benefits are provided based on the Actuarial
Valuation done at the year end, using the Projected Unit Credit Method.

Actuarial gains/loss are charged to the Profit and Loss Account and not
deferred.

M. FOREIGN CURRENCY TRANSACTIONS:

Transactions denominated in foreign currencies are recorded at the
exchange rate prevailing at the time of the transaction.

Monetary items denominated in foreign currencies at the year end are
restated at year end rates. In case of monetary items which are covered
by forward exchange contracts, the difference between the year end rate
and the contracted rate is recognised as exchange difference. Premium
paid on forward contracts has been recognised over the life of the
contract. Non monetary foreign currency items are carried at cost.

In respect of branches, which are integral foreign operations, all
transactions are translated at rates prevailing at the time of
transaction or that approximates the actual rate as at the date of
transaction. Branch monetary assets and liabilities are restated at the
year end rates. Any income or expense on account of exchange rate
difference either on settlement or on translation is recognised in the
Profit and Loss Account.

N. DERIVATIVE TRANSACTIONS:

The Company uses derivative financial instruments, such as Forward
Exchange Contracts, Currency Swaps and Interest Rate Swaps, to hedge
its risks associated with foreign currency fluctuations and interest
rates. Currency and interest rate swaps are accounted in accordance
with their contract. At every period end all outstanding derivative
contracts are fair valued on a marked-to-market basis and any loss on
valuation is recognised in the Profit and Loss Account, on each
contract basis. Any gain on marked-to-market valuation on respective
contracts is not recognised by the Company, keeping in view the
principle of prudence as enunciated in AS-1 "Disclosure of Accounting
Policies".

O. BORROWING COSTS:

Borrowing costs that are attributable to the acquisition of or
construction of qualifying assets are capitalised as part of the cost
of such assets. A qualifying asset is one that necessarily takes
substantial period of time to get ready for intended use. All other
borrowing costs are charged to revenue.

P. PROVISIONS AND CONTINGENT LIABILITIES:

A provision is recognised when there is a present obligation as a
result of a past event where it is probable that an outflow of
resources will be required to settle the obligation, in respect of
which a reliable estimate can be made. Contingent liability is
disclosed for (i) Possible obligations which will be confirmed only by
future events not wholly within the control of the Company or (ii)
Present obligations arising from past events where it is not probable
that an outflow of resources will be required to settle the obligation
or a reliable estimate of the amount of the obligation cannot be made.
Contingent assets are not recognised in the financial statements since
this may result in the recognition of income that may never be
realised.

Q. CHANGE IN ACCOUNTING POLICIES:

i) The warranty provision has been recognised based on management
estimate regarding possible future outflow on servicing the customers
during the warranty period, on the sales effected during the year.
These estimates are computed on scientific basis as per past trends of
such claims which hitherto were accrued and recognised based on claims
preferred. Due to this change, the profit for the year is lower by
Rs.21.25 Crore.

ii) The Company has hitherto been charging depreciation on windmills on
Straight Line Method, as Continuous Process Plant at the rates and on
the basis specified in Schedule XIV to the Companies Act, 1956. The
management has thought it prudent to switchover from Straight Line
Method to Reducing Balance Method to follow an uniform practice and has
recalculated the depreciation from the date of such assets coming into
use. As a result, the charge for depreciation is more by Rs.15.75 Crore
(including Rs.8.11 Crore net of Deferred Tax of Rs.4.17 Crore for the
earlier years) and the profit for the year is lower by the said amount.